NVIDIA (NASDAQ:NVDA), which develops graphics processing solutions for a number of end markets, has seen its stock price rise 25.66% year to date, crushing the Nasdaq's 10.63% spike over that time. The stock price reflects a business that has performed well over the last year amid strong demand for both its gaming- and professional graphics-oriented products.
With the company set to report its quarterly earnings after market close on Thursday, here's what investors should keep an eye out for when the results roll in.
PC gaming is key to the NVIDIA story
NVIDIA reported that revenue from gaming-oriented graphics processors grew 10% year over year in the second quarter, as a result of "continued strength in PC gaming." Management said during the last earnings call that it expected a seasonal uptick in gaming-oriented graphics processor sales in the current quarter.
CEO Jen-Hsun Huang said during the earnings call that the average selling prices of NVIDIA graphics processors has been growing and is likely to continue to rise as "the production value of games" increases. He also indicated he expects that PC gaming as a whole should continue to grow.
Additionally, it has been widely reported that NVIDIA's latest Maxwell family of graphics processors is extremely competitive with what rival Advanced Micro Devices (NASDAQ:AMD) has to offer. The consensus seems to be that NVIDIA's latest graphics processors are faster and more power efficient than the corresponding systems from AMD. This could help NVIDIA gain market share in what seems to be a favorable market for gaming-oriented graphics chips.
Let's talk Tegra
While NVIDIA's bread-and-butter comes from the sale of graphics processors into the gaming and professional markets, much of the "buzz" around the company seems connected to its Tegra applications processors.
The company has repeatedly cited in-vehicle infotainment systems as a key growth driver for its Tegra division. Fellow Fool Steve Symington pointed out that NVIDIA's Tegra processors are already found in vehicles from top car makers such as BMW and Volkswagen. Symington also noted that NVIDIA's Tegra processors can be "found in more than 6.2 million cars."
Additionally, while last year's Tegra 4 wasn't particularly successful -- NVIDIA reportedly delayed this chip to focus on its smartphone-oriented Tegra 4i, which also didn't do well -- it appears the latest-generation Tegra K1 chip is gaining traction in notable tablet designs. For example, the latest Nexus 9 tablet built by HTC is powered by NVIDIA's 64-bit version of Tegra K1, and the Xiaomi MiPad sports the 32-bit version.
All told, NVIDIA expects sequential growth in its Tegra business for the soon-to-be reported quarter.
What do analysts expect?
According to Yahoo! Finance, analysts expect NVIDIA to report revenue of $1.2 billion and earnings per share of $0.29 for the third quarter. These numbers are in-line with the midpoint of NVIDIA's own forecast.
Perhaps the more interesting number that will come from Thursday's earnings report will be the company's guidance for the following quarter. Analyst consensus calls again for $1.2 billion on the top line, but for a slight earnings per share drop to $0.28.